While the world was caught off guard by the news that Dubai is on the verge of defaulting on their debt, Sheikh Ahmed bin Saeed al-Maktoum, a family member of the Dubai’s ruling class, noted the decision to announce was carefully planned. I have no doubt the decision was planned; however, what does not add up to me is this quote:

“unprecedented growth, in Dubai and across the (United Arab Emirates), over the past decade has helped lay the foundation for what is now a broad-based sustainable economy beyond just natural resources.”

Is the United Arab Emirates truly in a position to continue growing beyond their involvement in natural resources? I would be hard pressed to believe such a statement.

The unprecedented growth in the UAE was based on energy, all other industries were offshoots. Why do you think the UAE is pushing for higher energy prices? The revenues from energy production fund government operations, and without that revenue the governments of the UAE will constrict – if not collapse.

A potential saving grace for Dubai may be their big brother, Abu Dhabi.  This write up by Northern Trust bank suggests Abu Dhabi may help the country restructure debt in exchange for assets such as Emirates airlines. As John Galt points out, someone sold a large amount of gold at the open of the markets after the Dubai news – was Dubai trying to raise funds, or was Abu Dhabi getting ready to assist? A rescue move by Abu Dhabi move would make sense on a number of levels – both business and cultural.

The real question that should be asked is this: Are any other governments facing default and would would be their “big brother” providing a rescue?

If Dubai does default, the credit markets will slow yet again, especially into emerging markets.  Such an event will put even more pressure on smaller governments facing debt issues due to the global economic depression. But what about other other governments, what about the “stable” countries such as the United States, United Kingdom, the European Union and Japan?

The sovereign debt worldwide has increased roughly $15.3 trillion dollars between 2007 and 2010, and the majority of the debt was placed squarely on the books of the countries above. If the United Kingdom or Japan were to default a number of countries may be able to assist, but if the United States where to lapse on debt there is no one with a bigger checkbook that could come to the rescue.

The future remains to be seen but if it can happen to Dubai – a country that was the jewel of the UAE – it can happen to anyone. Over the next year we may understand that the term “too big to fail” is indeed false.

By Asian nations looking to ‘lead world’ in an EU-style community, does they mean China and India run Asia at the cost of the other nations?

Asian nations discussed plans at a major summit Saturday to “lead the world” by boosting economic and political cooperation and possibly forming an EU-style community.

The prime ministers of regional giants China and India also looked to foster unity on the sidelines of the summit in Thailand after months of trading barbs over long-standing territorial issues.

But nuclear-armed North Korea and military-ruled Myanmar were also set to top the agenda in the royal beach resort of Hua Hin, underscoring the challenges still facing the region.

The European Union is, basically, a French jockey riding a German military horse.  If Asia created a EU style government, I would expect something very similar; however, I have a hard time seeing China giving up political or military control to India (or any other country).

Microsoft did not escape the wrath of European regulators regarding Internet Explorer. Fines were paid. People were unhappy. Cat and dogs were living together. Basically, the EU made it as difficult for Microsoft as possible where the company was left with only one choice – remove IE or lose your ability to distribute Windows within the EU.

So, naturally, Microsoft said “Hey yeah, we’ll remove it!”

“We’re committed to making Windows 7 available in Europe at the same time that it launches in the rest of the world,” Dave Heiner, Microsoft deputy general counsel, said in a statement, “but we also must comply with European competition law as we launch the product.”

“We believe that this new approach, while not our first choice, is the best path forward given the ongoing legal case in Europe,” he added.

How couldn’t the company comply? When threatened with the loss of a major revenue source, this was the only logical step…. But… If there is no browser installed on the OS, how will anyone have the ability to get online?

Seriously?

If the OS does not ship with some browser, how will EU users have the ability to get ANY browser on their system without Microsoft developing a “Browser of your choice” delivery platform? I would think such a move on their part is unlikely.

Is this Microsoft’s way of trying to get back at the EU? Kind of a “You asked for it, it doesn’t make sense, but you got it”?

I’m just having a hard time seeing how this is going to work right now.

When the news came out that President Obama, essentially, fired GM CEO Rick Wagoner I was blown away – and HIGHLY worried that the lines between government and business had finally blurred too much. I strongly believe the government should not tell a company how it should function. If the company cannot function on its own, the company should cease to exist.

My level of concern jump yet again as I found out the Obama Administration refused the repayment of TARP loans from a number of small banks. Why? I think Stuart Varney has hit the nail on the head:

The government wants to control the banks, just as it now controls GM and Chrysler, and will surely control the health industry in the not-too-distant future. Keeping them TARP-stuffed is the key to control. And for this intensely political president, mere influence is not enough. The White House wants to tell ‘em what to do. Control. Direct. Command.

It is not for nothing that rage has been turned on those wicked financiers. The banks are at the core of the administration’s thrust: By managing the money, government can steer the whole economy even more firmly down the left fork in the road.

If the banks are forced to keep TARP cash — which was often forced on them in the first place — the Obama team can work its will on the financial system to unprecedented degree. That’s what’s happening right now.

Paranoid? Maybe. Until one sees even more indicators of what the administration has in mind. On “Face The Nation”, Treasury Secretary Tim Geithner said the following:

When, in the future — or I’ll just say, if, in the future, banks need exceptional assistance in order to get through this, then we’ll make sure that assistance comes with conditions, not just to protect the tax payer but to make sure this is the kind of restructuring necessary for them to emerge stronger. And where that requires a change of management of the board, we’ll do that.

While I can understand conditions on assistance, there are a large number of fiscally sound financial institutions forced to take TARP cash. Yes, Forced. If the company was forced to take cash from the government, this implies any company forced to take cash will also be forced to change management as the government sees fit. Something is not “conditional” when you have no options to begin with.

Why does the Administration want significant control of the financial markets? I my opinion, it is not due to the current recession, it is due to Europe and the G20.

G-20 leaders declared a crackdown on tax havens, tighter regulation of hedge funds and a new supervisory body to flag problems in the world financial system.

A sweeping G-20 communique appeared to bridge the gap between the United States and major European countries over how far to push changes on regulation to curb the market excesses that led to the current crisis.
Marco Annunziata, chief economist of the UniCredit Group in London, said the G-20 accord gives the U.S. “very little” while Europeans got most of what they wanted.

The agreement out of the G20, essentially, gives regulatory power over our economy and finical system to international interests – mainly France and Germany. This is huge as EU interests and priorities regarding economics are NOT the same as US interests.

If you thought the Bush administration was power hungry, and it was, you need to wake up and see what is going on now. The current administration is not looking out for U.S. interests, as it said it was going to under the “change” mantra; no, the administration is marching free enterprise and capitalism right into the hands of European controlled socialism.

It was just a matter of time before the protectionist tone the new U.S. administration and Congress set started to get the attention of other world powers.  The European Union has threatened to retaliate if the U.S. sticks to its guns on “Buying American” with the money provided by the next stimulus package.

That whole “None of the funds appropriated…may be used for a project for the construction…unless all of the iron and steel used in the project is produced in the United States” looks to be in major jeopardy (as it should be).  Look for any other language that restricts funding to Union only labor to be removed or altered. That same goes for any language restricting companies that can be recipients of such funds.

A trade are would not benefit any country; U.S. or otherwise.  

The American political system is sending a very dangerous message to the rest of the world, a “U.S. only” message that could easily be misconstrued as a sign that we are only concerned about U.S. interests only.

While we live in a global economy, and the United States needs to address U.S. concerns, our politicians need to be highly aware that other economies are hurting as well. While not looking to the U.S. to solve their problems, they are looking for signs that the free market is still alive (maybe not healthy, but alive…)

A trade war would only cause the recession/depression be prolonged and intensified, let’s just hope somone is paying attention.

As energy prices rose over the last 4 years, so did Russia’s desire to once again become a major player in world politics.  This time, however, the country could actually afford to do so because the huge amounts of capital the sale of oil and gas provided to its government.  The new found money allowed Russia to start expanding their military once again, and it also provided them a means of purchasing (for lack of better words) it’s way into situations.  Think of it as a pay for play.

Now that energy prices are falling, and the demand for oil and natural gas is low in Europe (and in the world in general at this moment) Russia finds that all may not be as positive as they had previously expected.  In order to counteract the decline in energy and the credit crisis, Russia has devalued their current – the rouble – 9 times.  This has the potential to cause inflation/hyperinflation if energy prices to not improve, not to mention that fact that it also can wipe out the savings of the average Russian citizen.  

Russia is vulnerable simply because their empire is built on natural resources. They have no major industry to speak of, no goods that are produced and consumed on a mass world wide scale, so what is the country to do when their base is threatened?  Use it as a weapon – be it for self-preservation or aggression.

If you take note, Russia is talking about cutting off natural gas supplies to the Ukraine once again.  The last time this took place was in 2006.  Both sides have their own version of what is taking place.  Russia says the Ukraine is expecting unrealistic prices and that they pay off their debt.  The Ukraine says they’ve paid their debts and believes the cost of gas it too high.

I am not saying Russia is in the wrong, just imagine if Russia was acting with purely political interests in mind.  “We don’t like the President you chose, ok, we are shutting off your supply to gas.” or “You didn’t vote in our favor during the last session of the UN, your oil transfers now will come in at 10% of what you were previously getting” all suddenly become possible tools within their power.  

Not a big deal, you may be thinking – wrong.  Russia provides roughly 25% of the EUs natural gas.  If it wanted to make life difficult as an act of aggression or self-preservation, it could do so really quickly.

This is the power Russia truly has.  Unless the EU takes steps to prevent dependence on Russia, they run the risk of being help at Russia mercy. I hope that someone in Europe is paying attention to this…

Just a quick reality check.

Iran has the second largest proven natural gas reserve in the world, second to to Russia. Iran also roughly 10 percent of the world’s total proven petroleum reserves and sits on one of the largest oil fields in the world so, when the Iranian government says their nuclear program is of a “Peaceful nature” I am a bit skeptical.

Now Mohamed ElBaradei, head of the the UN’s International Atomic Energy Agency, has “serious concern” and stated:

Iran needs to give the agency substantive information to clear up suspicions…We need, however, to make use of all relevant information to be able to confirm that no no nuclear material is being used for nuclear weapons purposes”

I have no issues with the Iranian people, I simply have a great deal of skepticism of government (Iranian or otherwise) at this point. Furthermore, the U.N. has proven itself to be a lame duck organization, unable to govern itself out of a paper bag, which only raises my doubts even more.

At this point the E.U. needs to wake up and look at what is in their back yard. The only way Iran will disclose their activities is from financial pressure from Europe.

UPDATE:

Here is an interesting WSJ Opinion write up by Richard Holbrooke, James Woolsey, Dennis Ross and Mark Wallace – a good bi-partisan group of highly qualified individuals. The article can be summed up by this paragraph:

Tehran claims that it is enriching uranium only for peaceful energy uses. These claims exceed the boundaries of credibility and science. Iran’s enrichment program is far larger than reasonably necessary for an energy program. In past inspections of Iranian nuclear sites, U.N. inspectors found rare elements that only have utility in nuclear weapons and not in a peaceful nuclear energy program. Iran’s persistent rejection of offers from outside energy suppliers or private bidders to supply it with nuclear fuel suggests it has a motive other than energy in developing its nuclear program. Tehran’s continual refusal to answer questions from the International Atomic Energy Agency (IAEA) about this troublesome part of its nuclear program suggests that it has something to hide.